Facebook Will Become The Largest Repository Of Personal Information Ever

Matt Rosoff Business Insider
With IPO hype blowing like a maxed-out hairdryer into my face, I Googled ... Friendster—remember, the wildly successful shining star of social networking that everyone had drooled over, and that had spurned a buyout offer from Google? Me neither.

Turns out, in December 2009, Friendster was bought for the paltry pittance of $26 million by MOL Global, a Malaysian company. In 2011, Friendster discontinued its social networking activities and rebranded itself as a site where Asian users "create avatars, discover new worlds, enjoy games, and meet new people."

So what happened to the data, photos, innermost feelings, and nasty secrets that American users had posted on it? What happened to those compromising morsels they'd tried to delete? The data of their friends? Information in accounts they'd closed?

Nothing happened to them. They're on hard drives in data centers. Users can still access their information and export photos to Flickr and Multiply, but they can't remove any of it from those hard drives. It's become immortal. And it has value.

This is the information age. Users jump through hoops to hand over their information for free. Storage is so cheap it's a negligible factor in the decision making process. Selling information—or selling access to it for advertising purposes—is still easy enough. The same information can be sold from the same inventory millions of times. It never runs out. There are no cost of goods, no handling and shipping expenses. It doesn't rot or mildew or rust, though it can get stale and does need to be updated, but users are more than happy to do that for free. User information is simply the best product ever invented—though it might not as sexy as.... Manufacturing Supercars in America.

Facebook may go the way of Friendster someday, given how the internet works. Someone might come along with a better mousetrap, or with a worse but cooler-looking mousetrap, or mob psychology might change, and then Facebook might go into an unstoppable downward spiral, interspersed with re-launches, followed by another spiral, and in the end, it might become irrelevant.

Except it will own an unimaginable body of information. Facebook already has 845 million active users who have recounted their lives and documented events and complained about their bosses and exes and shared secrets and unsavory tidbits and shopping habits that are now securely and forever spread out over various data centers. These bits of information are linked in a myriad ways to delineate connections and relationships, many of them known only to Facebook. A very valuable product. And Facebook owns it, not the user.

Monetizing it might appear a bit delicate for the faint of heart, but mostly, people have gotten used to it. And the young generation that has never known anything else takes it for granted. In its regulatory filings, Facebook reported revenues of $3.7 billion for 2011. A good beginning. And if it continues gathering information on its users and their friends on an upward trajectory for a few more years, Facebook will become by far the largest repository of true-name personal information ever. But is it worth $100 billion today? Or even $50 billion?

Clouds are forming on the horizon: a whole slew of companies, from startups to big guys like Google and Apple, are developing ever more sophisticated tracking technologies, and they all use the same business model—gathering and monetizing information on the personal minutiae of their users. And as more companies succeed at it, that information becomes commoditized, and its value invariably softens.